Busy day yesterday, so there still hasn't been as much chance to use the Xoom as I would like. However, I can report that I seem to be developing a hybrid way of using the on screen keyboard.
The Xoom onscreen keyboard is a slightly compacted version of QWERTY without the punctuation key normally found under the right-hand pinky finger. Between that and the inability to actually rest fingers in the normal home position, I have found myself resorting back to what I used to call "advanced hunt and peck." That is, not using all 10 fingers, but more than just one or two. I do need to look at my hands a bit more regardless since there isn't the physical feedback of touching seperate keys.
Contrary to my post of yesterday, though, it now seems to be reacting the same as my Android phone with regards to automatically capitalizing the letter I and the first letter of a sentence. I did not make any settings changes at all between the two posts, so I am not sure where that change came from.
I am still seriously considering getting the wireless keyboard though. The on screen keyboard takes up a significant chunk of real estate when open, plus there is the fatigue factor. It is nessessary to hold your hands completely up off the screen to prevent accidental touches that cause stray letters to creep in.